The Microsoft Case

The Microsoft Case

November 17, 2011

Week 3 Paper

Introduction…………………………………………………………………………...02

The Case...……......................………….………………….………………………… 02

Conclusion………………………………………………………………………....... 03

References………………………………………………………………………....... 04

Introduction

The purpose of this paper is to discuss the Microsoft Monopoly case and how it relates to what we have been learning in our Economics class.

The Case

In 1999 Microsoft was accused of violating the Sherman Act, which was passed in 1890 with the purpose of maintaining competition in the marketplace by opposing the combination of entities. Microsoft was positioned as the largest publisher of operating systems in the world and this was their third anti-trust trial in the United States. The charges of the alleged monopoly were whether Microsoft were allowed to bundle Internet Explorer with their Operating Systems. The major theory was that they were going to turn into the sole internet browser supplier because it came bundled with every new personal computer and every Microsoft operating system, causing a monopoly. By definition this simply is not the case as Microsoft were not the only producers and sellers of internet browsers, nor was there any blocking of new entries to the market.

There were also plenty of close substitutes back in 1999, with the internet browser Netscape actually far more popular than Microsoft's Internet Explorer. There was a perception by Microsoft's competitors that there were barriers to entry to the marketplace because they did not have their own operating system to bundle their browsers with, but the only real barriers were that they were not as aggressive as Microsoft were in getting the name of their product out there. There was no chance of this being a natural monopoly as there was nothing being released at a lower rate than their competitors. The competitors were all offering internet browsers at the same rate, free. That goes against...